Health and Hospital Expenditures

State and Local Backgrounders Homepage

Spending on health and hospitals includes spending on community and public health programs, government-owned hospitals, and government payments to privately owned hospitals.1 Census counts most Medicaid spending as public welfare, but includes some Medicaid spending under the health and hospital expenditure category.

How much do state and local governments spend on health and hospitals?

In 2017, state and local governments spent $294 billion, or 10 percent of direct general spending, on health and hospitals.2 Health and hospitals combined were the fourth-largest source of state and local direct general spending in 2017 and roughly equal to higher education expenditures.

In 2017, 66 percent of health and hospitals spending went to hospital services and 34 percent went to other health programs.

Hospital services include the operation of university medical schools, state-owned hospitals for people with mental illness or disabilities, public children’s hospitals, and payments to private hospitals for public services. Payments to providers under public welfare programs, such as Medicaid, are counted separately under public welfare expenditures. The Medicaid and CHIP Payment Access Commission estimates that payments to hospitals account for 13 percent of total Medicaid spending, suggesting that the portion of Medicaid spending that Census counts under the health and hospitals classification is likely relatively small.

Other health program expenditures include mental health and substance abuse programs, county health department inspections, water and air quality regulation, and health inspections.

In 2017, 96 percent of health and hospital expenditures were for operational costs, such as public health administration, community health programs, public hospital operations, and regulatory services. The remaining 4 percent went to capital outlays such as hospital construction.

How does state spending differ from local spending and what does the federal government contribute?

State and local governments spend roughly the same proportion of their budgets directly on health and hospitals. (Direct state spending does not include the value of state funds transferred to local governments or vice versa.)  In 2017, 9 percent of state direct spending went to health and hospitals versus 10 percent of local direct spending.

However, states vary considerably in their distribution of state and local direct health and hospital spending. In Indiana, for example, only 13 percent of direct health and hospital spending occurred at the state level in 2017. In contrast, in Vermont the state was responsible for 97 percent of direct health and hospital spending.

Overall, 89 percent of total health and hospital spending ($263 billion) was funded by state and local governments in 2017. The remaining 11 percent ($31 billion) was funded by federal grants to state and local governments.

How have health and hospital expenditures changed over time?

In 1977, state and local governments spent $93 billion on health and hospitals (in 2017 inflation-adjusted dollars). In 2017, they spent $294 billion. In 1977, 8 percent of state and local spending went to health and hospitals compared with 10 percent in 2017. Much of this spending increase was driven by the rising cost of health care.

How and why does spending differ across states?

Across the US, state and local governments spent $904 per capita on health and hospitals in 2017. Wyoming spent the most on health and hospitals at $2,626 per capita, followed by South Carolina ($ 1,640), Alabama ($1,467), and Kansas and Mississippi (both $1,456). New Hampshire spent the least per capita at $132, followed by Arizona ($227), Rhode Island ($259), Maine ($273), and South Dakota ($379).

Data: View and download each state's per capita spending by spending category

Health and hospital spending may vary by state for many reasons, including higher utilization of health services or hospital readmission rates among some populations; higher regional health care costs; the number of state and locally-owned hospital beds; or other factors that may require additional investment in public health services to address, such as pollution or mental health and substance abuse problems .

 

Interactive Data Tools

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State Fiscal Briefs

What everyone should know about their state’s budget

Further Reading

Health of the States: How U.S. States Compare in Health Status and the Factors that Shape Health

Steven H. Woolf, Laudan Y. Aron, Derek Chapman, Lisa Dubay, Emily Zimmerman, Lauren C. Snellings, Lindsey Hall, Amber D. Haley, Nikhil Holla, Christopher Lowenstein, and Timothy A. Waidmann (2016)

Assessing Fiscal Capacities of States: A Representative Revenue System–Representative Expenditure System Approach, Fiscal Year 2012

Tracy Gordon, Richard Auxier, and John Iselin (2016)

 

Notes
1 Data are from census expenditure categories E32, E36, F32, F36, G32, G36, K32, and K36.

2 Direct general spending refers to all direct spending (or spending excluding transfers to other governments) except spending specially enumerated as utility, liquor store, employee-retirement, or insurance trust. Unless otherwise noted, all data are from the US Bureau of the Census, Survey of State and Local Government Finance, 1977–2017, accessed via the Urban-Brookings Tax Policy Center Data Query System, February 3, 2020, http://slfdqs.taxpolicycenter.org. The census recognizes five types of local government in addition to state government: counties, municipalities, townships, special districts (e.g., a water and sewer authority), and school districts. All dates in sections about expenditures reference the fiscal year unless explicitly stated otherwise.